The FASB is proposing the postponement of effective dates of ASU 2016-02, Leases (Topic 842) and ASU 2014-09, Revenues from Contracts with Customers (Topic 606) for certain entities in an effort to provide much needed relief as a result of the COVID-19 global pandemic. This deferral relief would be for those entities for which the guidance is either currently effective or imminently effective.
For ASU 2016-02, the FASB acknowledged in previously issued ASUs the challenges, which have been further amplified with the current pandemic, associated with implementation of major ASUs for private companies, smaller public companies and not-for-profit entities. Additionally, roundtables with public companies to discuss implementation issues and potential practical expedients have been postponed due to the COVID-19 global pandemic. The FASB is proposing the deferral of the implementation date of ASU 2016-02 to fiscal years beginning after December 15, 2021 for private companies, smaller public companies, not-for-profits, and employee benefit plans. ASU 2016-02 would be effective for public not-for-profits for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption would continue to be permitted.
For ASU 2014-09, stakeholders in the franchise industry raised concerns about the adoption of this guidance in regards to how the guidance relates to initial franchise fees. The timing of when revenues on these fees is to be recognized is unclear within ASU 2014-09. As a result, the FASB is proposing to defer the effective date of ASU 2014-09 for franchisors that are not public business entities until the time that the FASB can provide a cost-effective solution to applying the guidance. Franchisors that are not public business entities would still be allowed to adopt ASU 2014-09 for periods beginning after December 15, 2019. Application of the deferral would be made at the entity level based on individual revenue streams.
The full text of the Exposure Draft is available here.
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